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Monthly Archives: January 2017

U.S. loan funds recorded an inflow of $1.025 billion for the week ended Jan. 25, according to Lipper weekly reporters only. This marks the eleventh consecutive inflow since the week ended Nov. 16, when the inflow was $666.3 million.

There have now been a total of $11.59 billion in inflows over that span.

The four-week trailing average remained fairly level, rising to positive $942.4 million, from $917.2 million last week.

ETF flows were $246.4 million of the total this week, with $778.1 million flowing into mutual funds.

Year-to-date inflows from leveraged loan funds now total $3.77 billion, based on inflows of $2.53 billion to mutual funds and inflows of $1.24 billion to ETFs, according to Lipper.

The change due to market conditions this past week was positive $13.45 million, marking the eleventh straight week of increases. Total assets were $84.08 billion at the end of the observation period. ETFs represent about 18.5% of the total, at $15.56 billion. — James Passeri

Private equity shops are taking full advantage of investor cash pouring into the U.S. leveraged loan market. Since the middle of January, sponsors had unveiled at least six transactions for a total institutional volume of nearly $7 billion, according to LCD, a unit of S&P Global Market Intelligence. At an average transaction size of better than $1 billion, these are not small deals.

That’s a decent clip for this category, by recent standards. The only month in 2016 that saw more of this type of issuance was October ($12.45 billion).

Cash has been flowing into U.S. loan funds and ETFs over the past several months as investors anticipated rate hikes by the Fed (the floating-rate leveraged loan asset class, of course, tends to attract cash in a rising rate environment). — Jon Hemingway

TransDigm bonds fell as much as three points in active trading after a negative mention by shortseller Citron Research sent its stock price tumbling.

The company this morning extended commitment deadlines for its TLE repricing and new $2.029 billion, seven-year covenant-lite first-lien term loan to a date yet to be determined, sources said.

TransDigm’s $950 million of 6.375% subordinated notes due 2026 saw the majority of activity, falling to 99.75, versus 102.75 previously. The CCC+/B3 bonds priced in May at par, with proceeds used to fund the acquisition of Data Device Corporation (DDC).

TransDigm’s TLE is at 100/100.5 today, down about a half point from yesterday. The company’s TLD and TLC were both quoted at 99.75/100.5 today, down about a quarter point from the last session.

In the report, Citron’s activist short seller Andrew Left likens TransDigm’s business model in aerospace to Valeant’s in the pharmaceutical industry, to which he says investors are “riding the gravy train of highly leveraged profits based on a ‘price jacking’ strategy”.

TransDigm’s single largest customer is the Department of Defense, followed by Boeing and Airbus, according to the report, which argues that U.S. Government pressure will expose their business to gross revenue contraction and a devastating cut in EPS, adding that its business model has made them a dominant supplier of airplane parts to the aerospace industry while burdening its balance sheet with sky-high debt load.

The report cites then President-elect Donald Trump’s meeting with Boeing and Lockheed Martin and subsequent promises to lower prices for Air Force One and other military equipment, which Left says “will likely trickle down to subcontractors.”

The company’s stock, which trades on the NYSE under the ticker TDG, fell 11%, to $220. TransDigm’s market capitalization is approximately $13.4 billion.

TransDigm has been looking to reprice its $1.514 billion E term loan due May 2022, with price talk at L+275, with a 0% LIBOR floor, and offered at par. Existing pricing is L+300, with a 0.75% floor.

Credit Suisse today launched a repricing of the TLE, setting a Tuesday commitment deadline. The deadline was later accelerated to 5 p.m. EST on Monday before being put on hold.

TransDigm is also in the market with a new $2.029 billion first-lien term loan that will be used to refinance the existing C and D term loans. Pricing is L+275, with a 0% floor and an OID of 99.75. The deadline for this deal was previously today at 5 p.m. EST.

TransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States. TransDigm is rated B/B1. Existing issue ratings are B/Ba2, with a 3H recovery rating from S&P Global Ratings. Total debt at the company is approximately $10.3 billion. — Rachelle Kakouris /Kelsey Butler

U.S. leveraged loan funds recorded an inflow of $548.4 million in the week ended Jan. 18, according to the Lipper weekly reporters only. This is the tenth straight week of inflows for a total of $10.6 billion over that span.

That said, this is the lightest inflow in seven weeks and the four-week trailing average dipped to less than $1 billion for the first time in six weeks, at $917.2 million.

ETF flows accounted for just $57.3 million of the total, or 10%, its smallest share in nine weeks.

Leveraged loan funds in 2016 recorded inflows of $6.25 billion, based on inflows of $1.26 billion to mutual funds and $4.99 billion to ETFs, according to Lipper.

Loan funds surged in the second half of last year. Inflows were recorded in 23 of the last 26 weeks for a total inflow of $11.82 billion over that span. In the first 26 weeks of 2016, the cumulative outflow was $5.565 billion, with 18 negative weeks against just eight positive readings.

In total, inflows were recorded in 31 of 52 weeks last year.

The change due to market conditions this past week was positive $60.7 million. Total assets were $83.05 billion at the end of the observation period. ETFs represent about 18% of the total, at $15.31 billion. — Jon Hemingway

Jefferies LLC today priced a $527.63 million CLO managed by MJX Asset Management, according to market sources. This is the first new-issue CLO to price this year.

The manager is retaining a 5% vertical slice in its capitalized majority-owned affiliate (C-MOA) to comply with risk retention in both the U.S. and Europe.

Pricing details are as follows:

Up to 60% of the loans in the portfolio can be covenant-lite, according to a presale report from Fitch Ratings analysts.

The non-call period will run until July 20, 2019 and the reinvestment period will run until Jan. 20, 2022. A weighted average life (WAL) test will also run until April 20, 2025. The legal final maturity is on Jan. 20, 2029. — Andrew Park

The rush of issuers taking advantage of low rates to reprice existing loans, which started in earnest in September, is far from over.

Indeed, the surge in repricings so far in 2017 already has broken records, as borrowers continue to queue up for cheap money. Through yesterday, January loan repricings totaled $49.9 billion, topping the full-month record of $48.6 billion in January 2013, according to LCD, an offering of S&P global Market Intelligence.

The largest loans backing the roughly $40 billion wave of repricings so far this month include Asurion’s $2.65 billion deal, a $2.5 billion B-1 term loan to consolidate Petco Animal Supplies debt, and a $2.2 billion repricing for Travelport.

The average spread savings among this month’s repricings is 78 bps, with the average repricing window from initial issuance about 17.6 months. For reference, borrowers saved 75 bps on average via repricings in the fourth quarter and returned to market 16 months after the original issuance, on average.

And with cash continuing to pile up in investor coffers, repricings are getting bigger. The average size of repricings is $1.3 billion so far in January, the highest reading for any month in two years. — James Passeri

European loans gained 5.73% in 2016 — the strongest year since 2013, when the Index was up 9.09% (excluding currency). Moreover, for the first time in three years the market-value return stayed in the black, up 0.88%. In contrast, 2015 was essentially a coupon-clipping year, while 2014 saw market value decline by 1.58%.

Loans tracked by the S&P European Leveraged Loan Index (ELLI) gained 0.36% in December, up slightly from 0.25% in November, and 0.33% in October (excluding currency fluctuations). – Staff reports